AEO Q3 Earnings Decline Y/Y, Shares Fall - Analyst Blog
December 09 2013 - 9:00AM
Zacks
American Eagle Outfitters
Inc. (AEO) posted third-quarter fiscal 2013 adjusted
earnings of 19 cents per share from continuing operations, down
53.7% from 41 cents in the prior-year quarter. However, the
reported figure beat the Zacks Consensus Estimate by a penny.
The year-over-year decline in
earnings per share was mainly due to lower sales and weak
merchandise margins, partially offset by effective cost management.
Decreased earnings and a low profit outlook for the fourth quarter
spread negative sentiment among investors. This was reflected in
the company’s stock price, which fell nearly 9.5% on Friday, Dec
6.
Quarter in
Detail
American Eagle's net sales declined
5.8% year over year to $857.3 million but came marginally ahead of
the Zacks Consensus Estimate of $852.0 million. The decrease in
revenues was primarily due to decline in average unit retail and
average dollar sale. Stiff competition, an intense promotional
retail backdrop and lower traffic were the other headwinds.
Consolidated comparable-store sales
(comps) including AEO Direct, fell 5% compared with a 10% rise in
the year-ago quarter. Comps decreased 3% at the company's aerie
stores and 5% at AE Total Brand stores. However, American Eagle’s
AEO Direct segments reported year-over-year comps growth of
17%.
Adjusted gross profit for the
quarter fell 21.2% to $298.9 million. Moreover, gross margin
contracted 670 basis points (bps) to 34.9% owing to increased
markdowns and deleverage of rent, partially offset by improvement
in non-merchandise costs.
Adjusted selling, general and
administrative (SG&A) expenses decreased 6.1% to $205.7
million. Moreover, as a percentage of sales, SG&A expenses
contracted 10 bps to 25.6% in the quarter. The year-over-year
improvement in expenses was primarily due to fall in incentive and
travel costs, partially offset by higher costs related to factory
store openings and omni-channel expansion.
The company’s adjusted operating
income fell 52.4% to $61.2 million, primarily due to fall in sales
and gross profit. Consequently, adjusted operating margin
contracted 700 bps to 7.1%.
Financial
Position
American Eagle ended the quarter
with cash and short-term investments of nearly $357.2 million
compared with $544.7 million at the end of third-quarter fiscal
2012. During the quarter, the company had a capital expenditure of
$93 million primarily due to in-store and e-Commerce enhancements
as well as advancement of information technology systems.
At the quarter-end, American
Eagle’s total inventory was $518.9 million versus $481.2 million at
the end of third-quarter fiscal 2012. Inventory at cost per square
foot increased 6% from the prior-year quarter level primarily due
to shift in timing of merchandise reception.
Store Update
During the reported quarter,
American Eagle opened 13 stores, including 6 factory outlets. It
shut down 5 stores including 3 aerie stores. The company’s square
footage increased 2% on a year-over-year basis.
At the end of the quarter, the
company operated a total of 1,064 stores across the United States
and 61 international franchise stores.
Fourth Quarter Fiscal 2013
Guidance
For the fourth quarter of fiscal
2013, American Eagle projects earnings per share of 26–30 cents
compared with 55 cents in the fourth quarter of fiscal 2012. The
guidance is based on the company’s anticipation of mid single-digit
decline in comps. The current Zacks Consensus Estimate is pegged at
30 cents per share, which coincides with the company’s higher-end
guidance range.
Other Stocks to
Consider
Currently, American Eagle has a
Zacks Rank #3 (Hold). Some better performing stocks in the apparel
retail industry include Citi Trends, Inc. (CTRN),
Michael Kors Holdings Ltd.(KORS) and
Quicksilver Inc. (ZQK). All these carry a Zacks
Rank #2 (Buy).
AMER EAGLE OUTF (AEO): Free Stock Analysis Report
CITI TRENDS INC (CTRN): Free Stock Analysis Report
MICHAEL KORS (KORS): Free Stock Analysis Report
QUIKSILVER INC (ZQK): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Citi Trends (NASDAQ:CTRN)
Historical Stock Chart
From Sep 2024 to Oct 2024
Citi Trends (NASDAQ:CTRN)
Historical Stock Chart
From Oct 2023 to Oct 2024